Glove stocks strike back with great vengeance as pandemic continues

NOBODY should doubt that the stock market can behave wildly irrationally (or highly unpredictably) at times. Or that after every dark cloud, there is bound to be a silver lining.

Today marks one of the strongest rebounds for the Big Four glove makers after having been subjected to heavy sell-off lately.

While a spike in the number of COVID-19 infections which culminated in the number of positive local cases surpassing the 3,000-mark for the first time yesterday would only mean looming prospect of MCO 2.0 – which is never business-friendly – it has somehow energised glove-related stocks.

Amid renewed interest, the Big Four glove makers chalked up gains ranging from 11% to 21% at the close of trading with Hartalega Holdings Bhd emerging the day’s biggest gainer after surging RM1.60 or 14.68% to RM12.50 with 21.7 million shares traded.

Supermax Corp Bhd came in second on the top five gainers’ list after edging up RM1.25 or 20.66% to RM7.30 with 68.72 million shares traded.

Top Glove Corp came in fifth after spiking 70 sen or 12.07% to close at its intraday high of RM6.50 while Kossan Rubber Industries Bhd inched up 45 sen or 11.11% to end the day’s trading at RM4.50.

Even smaller players like Careplus Group Bhd, Comfort Gloves Bhd and Rubberex Corp (M) Bhd enjoyed the spoils by closing higher at RM2.95 (+65 sen or 28.26%), RM3.62 (+54 sen or 17.53%) and RM1.92 (+44 sen or 29.73%) respectively.

Thanks to the above-par performance of the Big Four glove counters, the FBM KLCI skyrocketed 30.24 points to end the first week of 2021 at an intraday high of 1,633.19 (+1.89%) after sliding to a low of 1,595.12 at one point.

On the broader market, losers thumped gainers by 1,039 to 353, while 284 counters were unchanged, 408 untraded and 13 others suspended, according to Bernama.

Total volume decreased to 10.03 billion shares worth RM7.16 bil from 6.54 billion shares worth RM5.03 bil on Thursday (Jan 7).

On a bright note, Hong Leong IB (HLIB) Research yesterday (Jan 7) maintained its tactical “overweight” rating on the rubber glove sector despite the positive vaccine developments as it deemed “current sold down levels appears attractive”.

“Market leader Top Glove (target price: RM10.54) is our top pick for the sector, being the largest glove manufacturer globally with vast clientele, readily supporting the increasing demand,” noted the research house.

Analyst Farah Diyana Kamaludin expects the top four Malaysian glove players to increase their capacity by circa.18.5% in 2021 (the lion’s share being nitrile capacity).

“For CY2021, there will be an estimated addition of circa 34.9 billion pieces versus 29.3 billion pieces in CY2020,” she projected in a 1H 2021 sector outlook for rubber products.

“However, in view of the still unabating pandemic, it is expected to continue to fuel near term glove demand and thus, also leading to the possibility of a quicker capacity expansion.”

While demand surge and average selling prices are still fuelling prospects of glove stocks, investors must not turn a blind eye to the ESG (environment, social and corporate governance) conditions that can affect the long-term sustainability of glove stock prices. – Jan 8, 2021

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